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Lower costs help Chrysler move closer to profitability

DETROIT — Chrysler avoided collapse two years ago with the help of a government bailout. Now, lower costs and a fleet of new cars and trucks are moving it closer to profitability.

On Monday, the company posted a fourth-quarter net loss of $199 million, a vast improvement over the $2.7 billion loss a year earlier. Revenue rose 14 percent to $10.8 billion.

It also forecast a profit for 2011.

Chrysler Group LLC’s fortunes began to improve in June when its refurbished Jeep Grand Cherokee SUV went on sale. It also has four other completely new models: the 300 big sedan, the Dodge Durango SUV, the Fiat 500 minicar and the Dodge Charger muscle car.

“It can safely be said that what Chrysler delivered last year, on both the product and financial fronts, surpassed many expectations,” CEO Sergio Marchionne said Monday.

Karl Brauer, senior analyst for the Edmunds.com automotive website, said Chrysler’s new or revamped models, most of which hit showrooms toward the end of the year, have given it momentum to turn a profit.

“They certainly have more and more going for them all the time,” he said.
That’s a big change from 2009, when the company was struggling to survive after years of pilling up debt and building cars no one wanted. The U.S. government gave Chrysler $12.5 billion to stay in business and make it through bankruptcy. In exchange, it took a 10 percent stake in the company and arranged for the chief executive of Fiat SpA, Marchionne, to try to turn around the Detroit company.

So far, the plan is working.

Along with improved fourth-quarter results, Chrysler narrowed its 2010 loss to $652 million, down from a staggering $8 billion loss in 2009.

And for 2011, it predicted a net profit of $200 million to $500 million. Chrysler must be profitable before it can sell stock to the public, something it hopes to do at the end of the year.

That sale is important because it will allow the U.S. government to sell its ownership stake in the company.

Chrysler also owes the government $5.8 billion, which the company hopes to repay over time.

With predictions of U.S. auto sales rebounding this year, Chrysler should be able to turn profits and pull off the sale, said Joe Phillippi, a former Wall Street analyst who now is president of New Jersey-based AutoTrends Consulting LLC.

Also helping are years of cost cuts. Since 2007, Chrysler has closed five factories and shed more than 35,000 workers.

The initial public stock sale, however, depends a lot on new compact and midsize cars designed jointly by Chrysler and Fiat, said Phillippi.

The company also announced Monday that all of its 53,000 workers will be eligible for bonuses this year, although it didn’t say how much workers will get. Rival Ford Motor Co. said last week that it will pay $5,000 each to its 40,600 U.S. factory workers this year.

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